In 2005, Denmark became the first European country to make it mandatory for payments to national companies and the government to be invoiced. Discussed below are the most common types of invoices in Denmark.
- Proforma invoice
- Credit Memo
- Electronic Invoice
- Interim Invoice
- VAT invoice
- Recurring Invoice
- Final Invoice
- Past Due Invoice
In Denmark, it is a requirement that there is an abridged or estimated invoice that is sent by a seller to the buyer as an advance to a shipment or delivery of goods. It normally has details on the number of goods, their value, the weight of the goods as well as the transportation charges, including the means of transportation.
They are commonly used in Denmark as preliminary invoices with a quotation which is important for customs purposes when it comes to importation. They are different from other types of invoices in that they are not requesting or rather demanding for payment.
They are fundamentally a quote that is required by a buyer to make an application for an import license, contract for pre-shipment inspection, open letter of credit or arrange for the transfer of hard currency.
In Denmark, Pro-forma invoices inform the buyer and the appropriate import government authorities’ details of future shipments, and there shouldn’t be any changes that should be made without the buyer’s consent.
In Denmark, sellers and suppliers are normally issued with credit memos for the same or lower amount than the amount that was invoiced, and then the buyer is repaid or is set off against a balance due to other transactions.
It normally has a list of the products, quantities, and the agreed prices of the products or services that were provided to a buyer but the buyer returned them or they were not received. It may also be issued in cases where we have damaged goods, errors, or allowances. With reference to the previously issued invoice, a credit memo is supposed to reduce or eliminate the amount the buyer has got to pay and it is important to note that in Denmark, a credit memo is not meant to be substituted as a formal document.
It usually references the original invoice stating the reason for the issue and is different from other invoices as it may not contain the date, billing address, shipping address, terms of payment as well as the list of goods with their quantities and prices.
This is a rising innovation that has been described as the receipt of goods exchanging activity between a supplier and a buyer in electronic format. It is evident that in Denmark it is almost replacing the paper-based invoicing, due to embracing technology.
E-invoices are normally created, billed, and processed in a computer system of firms that have tax identification numbers upon the sale of goods or provision of services and stored in computers of involved parties under the law of e-transactions.
They are normally of two types, we have the unstructured invoice documents which either is a scanned version of a traditional paper invoice or an electronic format that is manually or automatically created from the seller’s system. It is called unstructured because, upon receipt of the invoice by the buyer, the invoice has to be updated accordingly to the accounts payable system manually.
The second class is the structured invoice and it is completely electronic and allows for the automatic and direct transition from the Accounts receivable to the buyer’s account.
E-invoicing has been made possible by the enormous demands to embrace technology to simplify the processes of doing business as well as fostering efficiency, alongside allowing the government to track transactions by various people and organizations for taxation purposes.
In Denmark, there are large projects that require that funds be availed in phases to ensure there are monitoring and evaluation of projects that require a lot of money. At times it might be due to the owners of the project wanting to ensure that the project is implemented in line with their own demands, or rather where funds at times come in slowly.
This prompts for the breakup of large payments into multiple payments that correspond to the completion of certain portions of a project. There has to be an agreement between the two involved parties to have multiple payments. The contractor will normally submit interim invoices ones a certain milestone is completed and the small businessmen and contractors have used this invoicing type to bid for large projects.
Denmark regards VAT invoices as the official proof of the total amount of taxes that a business collects from its clients on behalf of the government. Given the significance of the invoices, several laws and regulations govern how to create and what to do with them. A VAT invoice that conforms to the law and the invoicing requirements must include the following parameters:
- Business’ address and name
- Business’ VAT number
- Invoice date
- Buyer’s address and name
- Invoice sequencing number
- Buyer’s VAT number (Must add the phrase, “EU VAT reverse charged” if using the reverse charge mechanism”)
- VAT amount and rate for each item
- Final total paid by the buyer (including VAT)
- Currency used
Moreover, the Danish government requires businesses to issue VAT invoices within six months after delivering the product.
Besides, businesses need to keep these documents safely in digital format for at least ten years. This can help you if the authority wants to verify your tax records. The easiest way to store VAT invoices is to use tax software that automatically generates and safely stores the data in the cloud.
Businesses in Denmark that charge their clients a specific amount regularly find recurring invoices incredibly important. These invoices are particularly common among IT service providers, freelance digital marketers, and lawyers, but any professional can use the invoice if it suits their needs.
In Denmark, businesses issue final invoices as soon as the projects are completed. The purpose of doing this is to request full payment. This invoice is often more detailed than interim and pro forma invoices. It typically includes:
- Project’s total cost
- Itemized list of the provided services
- Invoice number
- Accepted payment methods
- Invoice due date
Once a client receives the final invoice, they should proceed to pay as agreed. But due to some reasons, that is not always the case. As a businessperson in Denmark, you can send the past due invoice to remind them to settle the payment if your client misses the payment due date.
The past due invoice includes the payment details and service terms included on the final invoice. Other than that, the invoices can include interest charges and lateness fees.
In conclusion, invoicing in Denmark is a requirement for every business so that the taxman can be able to monitor those avoiding taxes.